By Simon Collins, Director, Cashcade Ltd.
“WHO says Europe cannot produce internet giants?”, asks this week’s Economist, in an analysis of the online gambling industry and the trends driving its development in different markets around the world.
The business magazine’s central point is that, “governments would do far better to offer punters and online-gambling firms a safe, legal but regulated market”. Which, as we have highlighted on this blog, is exactly what has happened in the UK, creating many opportunities along the way. However, the respected journal notes, that is not the trend in…
…many major markets including the US, Germany and the Netherlands that have sought to close down online gambling operators. All of which has only resulted in driving, “the reputable internet gambling firms to friendlier shores and has pushed those Americans most determined to bet—the very people who are the most vulnerable to gambling’s excesses—to place their wagers in the murkier bits of the internet.”
The Economist notes that, “with its love of horse racing, sports and casinos, and its world-beating technology industry, America ought to be the natural home of this burgeoning field. But it has arrested industry entrepreneurs and ordered banks to halt payments to online-gambling firms.” Of course, many people in the US are keen to reverse this approach and the associated UIEGA legislation. However, with President Obama’s attention elsewhere, it may all be too little, too late for the US to play-catch-up with European, and specifically UK-based, companies such as BetFair.
However, the EU itself remains split as to the best way to legislate around the online gambling industry. “In theory there is a single market, but in practice only 13 of the European Union’s 27 member states approve of online gambling. Seven countries restrict it to gambling monopolies owned or licensed by the state, and another seven have followed the Americans and attempted to outlaw it.” That said, the European Commission seems keen to drive Europe’s advantage forward. In June, it lobbied against US regulation, claiming that restrictions on European online-gambling firms break World Trade Organisation rules.
Controversially, The Economist questions that the reason for governments to legislate against the industry is not, as often cited, to protect vulnerable customers, but to secure revenues from state-approved gambling monopolies, including lotteries. “The policy of many of the EU member states towards online gambling seems to be motivated more by protection of the public purse than by protection of the public,” says Leighton Vaughan Williams of the Betting Research Unit at Nottingham Business School.
“Trying to stem this tide is pointless”, The Economist argues, and the depleted state of current public finances on both sides of the pond makes opening up national markets more likely as the industry grows. The gross profit from online betting in Europe is thought to be about €3.5 billion ($5 billion) a year and the tax revenue from such a profitable new industry is likely to sway the legislators views eventually.